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Saturday, 19 December 2015

Is it important to have Goals oriented Savings?

Is it important to have Goals oriented Savings?

A friend of mine is earning a
lakh a month, and when I asked him, how much is he saving per month, his reply
was close to 30k per month. While saving 30% of monthly income is a good
savings rate, when I asked him if he has assigned any of the goals to his savings,
he went bonkers. Even, as per World Bank Data Gross Domestic Savings for
Indians in the year 2014 was 29%. But savings without goals is like doing
multiple graduations in various courses without knowing the purpose. Remember
those good old movies, where our Hero used to keep money in different kitchen
utensils for different purposes – Behan ki shaadi, Naya Ghar, etc. etc.

There are many benefits of
assigning goals to your savings be it in any asset class – Gold, Equity, Debt.
In fact one can select asset class depending on the goals. If Goal is for short
term like 1 year or so, one can look at fixed income instruments like FD’s or
Debt Mutual Funds. And if Goal if for longer duration like 20 years, one can
take advantage of equity returns over this longer span.

Assigning Goals also reduces the
chances of using that money/savings for some other purpose. It is a Human
tendency to use money for other things when it is not assigned to any
particular goal. Only if I know I am saving this money for my Daughter’s higher
education, I will not touch it for a foreign trip.

In a nut shell, when you start
savings, don’t forget to sit with your family members and financial planner to
assign goals to your savings. It will indeed give better direction to your savings.

Charu Hastir, CFPCM is founder member of www.theriteplan.com. Rite plan is an online financial planning
portal created to achieve a single objective of providing easy and Do It
Yourself Financial Planning to netizens. Rite Plan is wholly owned by Tikkun
Olam Financial Planning Services LLP. Please visit: https://theriteplan.com/index.php?route=common/home/